Lease or Buy: Why Should You Consider Leasing a New Car?

With the current market conditions, deciding whether to lease or buy a new car can be challenging. This article explores the pros and cons of leasing versus buying, taking into account current vehicle price inflation and updated business expenses. It is aimed at providing valuable insights for both business owners and individual car buyers.

Current Market Conditions

As of December 15, 2021, new and used vehicle prices have risen significantly due to high demand and limited supply. This has made it a favorable time to consider leasing a vehicle. Leasing allows you to avoid the underwater loan situation that can occur when you owe more on a car than it is worth. If you have leased a vehicle for a year or more, and it is in good condition, purchasing it at the end of the lease can be a smart financial move.

Business Considerations

If you own a business, there are additional factors to consider. For instance, if your business can write off the cost of a leased vehicle, leasing may be more advantageous. However, if you do not own a business, leasing might not be the best choice. Generally, if you drive more than 12,000 miles a year, leasing can help mitigate the depreciation costs. Conversely, if you drive 12,000 miles or fewer, buying a vehicle might be more cost-effective.

Perspectives and Personal Experiences

I am a car enthusiast and have owned numerous vehicles over the years. Typically, I buy used cars for personal use and new cars for my wife. Prior to the pandemic, buying used vehicles made more sense due to their affordability. However, with high vehicle prices, buying new overused vehicles is becoming more feasible. It ultimately depends on your specific circumstances and personal preferences. There is no one-size-fits-all approach to car purchasing, and what works best will vary from person to person.

Pros and Cons of Leasing

Leasing a new car can offer various advantages, such as lower monthly payments and the ability to drive technology and features that are only available on the newest models. Additionally, most lease agreements include maintenance and routine services, which can save you money in the long run. However, at the end of the lease, you may have to return the car if you do not exercise the purchase option, which can be a drawback.

Current Price Inflation and Dealer Markup

Currently, the inventory shortage, whether real or perceived, has led to increased vehicle prices. In the DC area, some dealers are marking up prices over MSRP by as much as $10,000 or more. For example, a local Chevrolet dealer is marking up a Corvette by $35,000. Similarly, used cars are also experiencing high prices. Understanding these market fluctuations can help you make an informed decision whether to lease or buy.

Conclusion

The decision to lease or buy a new car ultimately depends on your personal circumstances and financial goals. In today's market, leasing offers benefits that might not be present in a purchase agreement. Whether you are a business owner or an individual car buyer, it is essential to consider these factors when making the decision. As with any major purchase, it is wise to do thorough research and consult with professionals before finalizing your choice.